RPT-UPDATE 3-Glencore moves to buy S.Africa's Optimum Coal

Thu Sep 1, 2011 1:53pm EDT

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* Glencore's biggest target since its listing

* Asian giants hungry for S.African coal (Adds Glencore won't touch Optimum marketing deals, adds 60-day offer to shareholders)

By Ed Stoddard and Julie Crust

JOHANNESBURG/LONDON, Sept 1 (Reuters) - Commodity trading giant Glencore confirmed on Thursday that it aims to take a controlling stake in South African coal miner Optimum Coal Holdings with its local partner, prominent local politician-turned tycoon Cyril Ramaphosa.

The deal would be worth around $1 billion at OCH's current share price.

This would be Glencore's most significant purchase since its record share listing, when it sacrificed its fiercely protected privacy to gain the balance sheet firepower for making acquisitions.

Optimum, a mid-size producer with large export capacity at Richards Bay Coal Terminal and reserves, attracted keen buying interest from local and international companies since BHP Billiton originally put the mine up for sale.

South African coal is a key source of supply to both the European and Asian markets, particularly India - South Africa ships around 30 percent of its coal to India and increasingly, to China.

But competitors of Glencore - including some of the world's biggest commodity and energy traders - who had also looked at buying OCH, said earlier this week that they were uninterested because the mines were saddled with long-term marketing agreements.

"Where's the value if the marketing agreements are still in place?" one senior executive at an international trader said.

"We looked at it, we were approached earlier this year and we said 'no'," he added.

Unless these agreements could be bought out or broken, there was no value they could see in OCH's assets, sources at several firms said.

But Glencore will not touch the marketing contracts which BHP Billiton and Mercuria Energy have for coal from both the Optimum and Koornfontein mines .

"The lifespan of the assets is materially in excess of the lives of the existing contracts and the acquisition price represents a great value acquisition for the long term," a source close to the proposed deal said.

The acquisition of South Africa's sixth-largest coal producer would give Glencore access to two operating assets, the Optimum Collieries and Koornfontein Mines, as well as 8 million tons of coal export entitlements from the Richards Bay Coal Terminal.

"Optimum's high quality, long life coal assets and significant presence at Richards Bay Coal Terminal would be an attractive addition to our existing South African coal business," said Tor Peterson, director of the Coal/Coke commodity department at Glencore.

"We expect strong Chinese and Indian imports and concerns surrounding nuclear generation capacity to result in sustained underlying demand for coal," he added.

Glencore, via its wholly owned subsidiary Piruto B.V., said on Thursday that it and Lexshell 849 Investments Ltd, a company owned by Ramaphosa, have entered into agreements to buy 43.51 percent of Optimum's shares.

Glencore had on Monday either bought or gained a commitment to sell 49 percent of OCH's shares, sources close to the companies involved said.

Glencore had made offers to all OCH shareholders in early July. Shareholders had signed a 60-day agreement to consider Glencore's offer exclusively and this is to expire shortly, within the next week or so, they said.

The consortium plan to buy the remaining shares for 34 rand each, a 26 percent premium on the coal producer's share price before it released a cautionary statement on Aug. 17.

Shares in Optimum were up 1.4 percent at 33.55 rand, while Glencore's shares closed down 1 percent in London at 416.75 pence.

Glencore said the proposed transaction will preserve Optimum's status in South Africa as a black-owned, black controlled company. (Additional reporting by Jacqueline Cowhig; Editing by Greg Mahlich)

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